The UNECE Timber Committee has just conducted joint market discussions for the first time with the International Softwood Conference. They analyzed current markets developments for forest products in 2007 and forecast markets for 2008 in view of current policy issues. Major themes were: 1. softwood market developments, and 2. wood energy and wood mobilization. The full text of the Committee’s approved market statement is attached as are the summary tables of forecasts. 1 Of related interest is the companion press release coming from the Timber Committee’s Policy Forum on “Bioenergy policies and targets: opportunity for, or threat to, the European forests” .
Summary of Key Developments
Overarching market and policy developments
- Increasing wood energy is reshaping the entire UNECE forest sector
- Forest products markets are forecast to decline in North America, dramatically for sawn softwood, due to the crash in the United States housing market
- Positive market developments in Europe and Russia.
Public procurement policies
- Public agencies, trade associations and private companies are establishing procurement policies to ensure that forest products come from sustainable and legal sources
- Purchasers also aim to minimise the environmental impact of whole systems, through “green building” requirements, which directly influence markets for forest products.
Corporate social responsibility
- Trade associations are issuing specific codes of conduct for their members
- Companies are developing ambitious corporate social responsibility policies to demonstrate the positive social impact of their operations
- CSR policies are a means to shape consumer perceptions, gain competitive edge, and improve international recognition and perception
- Mutual recognition of trade associations’ CSR policies could facilitate trade.
- The new Russian Forest Code unifies national forest policy and promotes structural reform
- Russia imposed duties on log exports, scheduled to reach prohibitive levels by 2009 to encourage domestic processing and investment in the Russian wood processing industries.
- Several European countries are successfully raising public awareness through promotion campaigns by targeting parliamentarians
- The 2010 Vancouver Olympics and the 2012 London Olympics represent major opportunities to showcase wood
- A consistent approach is needed on wood specifications to aid choices for construction
- Certification of sustainable forest management is an important communication tool.
Certified forest products
- Certified forest area is approaching 300 million hectares worldwide, mostly in the UNECE region
- Chain-of-custody – tracing forest products from forest to consumer – is important to achieve the full benefits of certification
- In North America, most chain-of-custody certificates are held by the paper industry, which along with publishers, are key drivers of certification
- Another driver is the US Green Building Council which developed the Leadership in Energy and Environmental Design (LEED) rating systems which specify certified wood products
- Green building rating systems need a more inclusive approach and accept all internationally recognized sustainable forest management standards
- Woodfuels certification is forecast to drive further certification in the US.
CE marking and stress grading
- New techniques for non-destructive testing of sawnwood and engineered structural components enable wood to compete in new markets
- Adoption of stress grading is essential to comply with the European Union directive on CE marking for construction timber from 1 September 2008.
Markets for modified softwoods
- New processes are creating “new materials” that open up new marketing possibilities for both softwood and hardwood
- These new materials could allow wood to take market share from competing building materials.
- Growth in the global economy is strong, over 5% in 2007, with a slowdown of growth in the US, a levelling off in Europe
- Higher growth rates are expected (5-7%) in eastern Europe, Caucasus and central Asia
- High oil prices and financial turmoil are slowing down growth
- US dollar continues to fall against the euro, the Canadian dollar and other currencies
- US housing market is experiencing serious problems: housing starts are below 1 million per year (annual rate), about half the rate in 2005.
Wood raw materials
- Roundwood prices were at record highs in 2006
- UNECE region roundwood production reached 1.3 billion m 3, only marginally below the exceptional level of 2005
- European removals are forecast to increase by 5.4% in 2007
- Russia ’s rising export taxes on roundwood will reduce exports, which are forecast to halve to 11.0 million in 2008
- Countries dependent on Russian-sourced roundwood are looking for other sources, as well as investing in processing capacity in Russia.
- Wood energy use, driven by policy measures and high oil prices, is reshaping wood markets
- Expanding wood energy presents both a challenge and an opportunity for the forest and wood processing sectors
- Public policy development tries to balance the needs of the established wood products sector and the bio-energy sector
- Demand for processed fuels such as wood pellets is at record levels, resulting in shortages and higher prices
- Expanding volumes of trees killed by the mountain pine beetle in British Columbia, Canada are used for pellets, 80% of which is exported to Europe.
- Recent efforts to improve wood energy data quality reveal that many countries use much more wood than previously reported.
- Sawn softwood markets are forecast to decline from record levels in 2006, due to the collapse in the US housing market
- US consumption of sawn softwood is expected to fall by 11% in 2007, and a further 2% in 2008, down to 90.9 million m 3
- Production in North America (US and Canada) is predicted to fall by 5.8% in 2007, and another 1.0% in 2008, down to 116.1 million m 3
- US imports are forecast to fall even more, by 17.1%
- With low US sawnwood prices, and a weak US dollar, many European exporters have withdrawn from the US market
- Low sawnwood prices have also triggered the maximum export charges provided for under the renegotiated Softwood Lumber Agreement on Canadian shipments to the US
- European sawmillers are forecast to increase production in 2007, by 4.3%, and another 0.4% in 2008, to a record 116.2 million m 3
- Prices of sawlogs rose in 2007, along with sawnwood prices in Europe
- European consumption of sawn softwood is forecast to grow too, peaking in 2007 at 108.1 million m 3.
- Russian production is forecast to leap by 9% in 2007 and by a further 12% in 2008, to reach 24.1 million m 3
- Russian exports could rise by 9-10% in 2007 and 2008, reaching 18.4 million m 3
- New EU CE marking requirements could constrain suppliers to Europe, including some in Russia.
- Sawn hardwood markets are forecast to remain buoyant in the UNECE region
- European markets are forecast to grow by about 2.4% in 2007 for both consumption and production, with little changes in trade
- In North America, sawn hardwood production is forecast to fall in 2007, by 1.7%, to 28.5 million m 3, but then recover in 2008.
- Europe, US and China are demanding European and American white oak and beech, and prices rose in 2007
- Developments in tropical sawnwood include: slowing decline in forest cover, decrease in log exports in favour of value-added processing and continued illegal logging.
- European panel markets are forecast to continue growth in 2007 and 2008
- Rising raw material prices stem from competition for wood for energy
- European MDF and OSB are expected to increase production and expand market share
- European production of particleboard is forecast to reach a record 47.5 million m 3 in 2008
- Projected capacity expansions mainly in eastern Europe are for domestic demand
- North American panel markets are forecast to remain relatively stable at 2006 levels, with slight increases for 2008, despite a sharp decrease in construction activity
- Russian production of particle board (+8%) and MDF (+52%) forecast in 2008
- Russian plywood production forecast to continue increasing to satisfy EU export markets.
Paper, paperboard and woodpulp
- Russian paper and paperboard consumption forecast to increase by 5.1% in 2007
- Little change is expected in production or consumption in North America or Europe
- Capacity expansion for paper has been correspondingly stronger in Asia and Latin America than in Europe or North America
- Consumption of recovered paper exceeded consumption of virgin pulp in western Europe for the first time, despite record exports of recovered paper to Asia of over 7 million m.t.
Additional information is available on the Timber Committee and European Forestry Commission’s website:
- Complete tables of country forecasts at: www.unece.org/trade/timber/mis/forecasts.htm
- Country market statements at: http://www.unece.org/trade/timber/mis/market/market-65/market-65.htm
- UNECE/FAO Forest Products Annual Market Review, 2006-2007 at: http://www.unece.org/trade/timber/docs/fpama/2007/fpamr2007.htm
Mr. Ed Pepke
Forest Products Marketing Specialist
UNECE/FAO Timber Section, Trade and Timber Division /p>
UN Economic Commission for Europe/Food and Agriculture Organization
Address: UNECE Trade and Timber Division
448 Palais des Nations
CH-1211 Geneva 10, Switzerland
Phone: +41 (0)22 917 2872
Fax: +41 (0)22 917 0041